SWOT analysis,everything you need to know

WHAT IS SWOT ANALYSIS?

SWOT refers to as Strength,Weakness,Opportunity,Threats.It is one of the most widely used tools.SWOT is used for the analysis of the company.It is used to determine the internal and external factors that effect the company as well as it's potential.The strength and weakness are for the analysis of  internal environment while the opportunity and threats are for analysis of external environment.This analysis focusses on real life approach. 

1. STRENGTH : This helps in determining the areas in which company is best and that gives compatitive advantage to the company.For example cost advantages,product quality,loyal customers. 

2 WEAKNESS : This helps in determining the area in which company is weak and need to  improve.For example unreliable products,staff management problem.  

3 OPPORTUNITY : This helps in determining the factors that will work in the favour of company in future and will give competitive advantage.For example changing customer taste,Technological advantages,Lower taxes,change in government regulations.

4 THREATS : This determines the factors that might work against the company in the future and company needs to focus on these factors and try hard so that it will not harm the company.For example aggressive competition,changing customer taste(not in direction of your product).

let me explain you with the help of personal life example

Suppose you have a bakery shop.You are the only one in the market who has great taste and hygine.So this is your strength.The weakness of your business is that it doesnot have a sitting while your competitors are having sitting. The opportunity is that oreo shake is trending in the market and you have already tried preparing it and now it is ready to launch so you can bring it early at the time of trend.The threats to your shop is that people are shifting towards healthy food so it's bad for bakery shop.

so when you do analysis of your company you will be able to know what is working in favour of you and what is not.It will help you in improving the things you are weak at and you have to take care of threats and need to do something so that threats become new opportunity. 

ADVANTAGES OF SWOT ANALYSIS

1 As a company it tells you about the core strength and the weaknesses so you can use your strength as your main factor and improve your weaknesses.

2 It tells you about your threats in the future so you can bring projects that make your threats your opportunity.

3 This is a cost effective way of analysis as neither technical skills nor experience is required.It can be done by an individual or group and no external consultant is required for the analysis.

4 It is not necessory that SWOT can be used for large business only.It can be used by small business also.

HOW AS AN INVESTOR YOU CAN USE SWOT ANALYSIS :

As an investor,you can use SWOT analysis to compare companies in same sector. It will help you to determine which company has more competitive advantage,what are their weaknesses,who has more opportunity and who is working on their threats etc.So by comparing this you can choose one of the company to invest.

If you have already invested in a company SWOT can be used to determine whether the new project taken by the company is useful for the company or not. 

DISADVANTAGES OF SWOT ANALYSIS :

1 SWOT analysis can be subjective,it reflects the facts and experience of an individual or group creating it so there may be many facts missing which the person making it might have ignored.

2 If something has been placed in one of the four category it can't be place in other three so it can result in biasing.

3 It usually reflects the current position and view point.

FINAL WORDS :

SWOT analysis might have many uses and one can use it to know more about the company,but don't rely on it too much as it is not always right.

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